Hotter than expected US inflation data has pushed markets to price in a Federal Reserve rate increase in December, lifting Treasury yields and weighing on technology shares. At the same time, Anthropic’s proposed IPO, strong TSMC revenue and a heavy SoftBank loss are sharpening investor focus on how AI growth is funded and valued.
US inflation strengthens the case for a December rate hike
US consumer prices rose faster than expected in October, increasingly challenging the prospect of monetary easing. Headline CPI increased 0.4% over the month against forecasts of 0.3%, and core inflation also came in ahead of expectations at 0.3%. Shelter made up more than 30% of the monthly rise, while energy inflation slowed.
Rate expectations shifted sharply as a result. Markets now see an 88.8% probability of a 25-basis-point increase in December, compared with 72% one week earlier, and a larger 50-basis-point move is also under discussion. The 10-year US Treasury yield climbed to 5% and the dollar firmed against major currencies.
The data reinforces the risk of interest rates staying higher for longer. That backdrop can cap equity valuations and put additional pressure on longer-duration assets.
Global equity markets
US equities closed lower, with technology shares under pressure, while European markets advanced and Asian markets were mixed.
US equities
Rising yields and inflation concerns pushed US stocks lower, with technology shares hit hardest. The Nasdaq fell 0.7%, the S&P 500 dropped 0.4% and the Dow Jones slipped 0.3%. Nvidia was a notable decliner, down 5.4%. US equity futures later recovered, helped by positive AI-related earnings news, most notably from CoreWeave.
European and Asian markets
European equities rose for a second consecutive session. The STOXX Europe 600 added 0.4%, supported by financials and technology stocks. Asian markets delivered a mixed performance, although chipmakers outperformed. South Korea’s KOSPI climbed 1.8% and Japan’s Nikkei rose 1.2%.
Oil prices and energy markets
Oil staged a modest recovery after a steep fall, though geopolitics continues to drive volatility. Brent crude gained 1% to $92.37 per barrel, having touched a two-month low. Support came from a larger than expected drop in US crude inventories and ongoing uncertainty over Iran and the Strait of Hormuz. On the other hand, hopes for diplomatic de-escalation and better supply conditions in the Middle East may restrict further upside. Energy prices remain a key input when assessing the inflation outlook and the direction of central bank policy.
AI investment and corporate developments
Capital continues to flow into artificial intelligence, but investors are paying closer attention to valuations, funding needs and the path to profitability.
Anthropic IPO tests investor appetite
Anthropic is targeting a valuation of approximately $1.02 trillion in its proposed IPO. The company could raise $64.4bn from the share offering, plus a further $26bn through a private placement with major technology investors including Google, Nvidia, Microsoft and TSMC. Its annualised revenue run rate stood at approximately $81bn at the end of October, reflecting an exceptional pace of growth.
OpenAI’s latest figures highlight the profitability question facing the sector. Third-quarter revenue rose 50% to $10bn, but operating losses widened to $10.9bn. The Anthropic listing will serve as a key gauge of investor willingness to back AI valuations and the industry’s large capital commitments.
Semiconductor and data-centre demand
Demand for AI infrastructure remains robust, supporting chipmakers and suppliers of critical data-centre components. TSMC reported October revenue of T$367.5bn, up 59.7% year on year, and cautioned that production capacity is likely to fall short of demand over the coming quarters. Infineon pointed to the rising importance of power semiconductors, forecasting that revenue from AI and conventional data-centre power supplies will grow from €2.2bn to nearly €4bn in FY2027.
These updates support the investment case for companies supplying the infrastructure behind the expansion of AI computing capacity, spanning semiconductors, memory, optical components, power management and cooling systems.
Anthropic moves into workplace software
Anthropic’s expansion into workplace applications presents a fresh competitive challenge to established software providers, particularly Microsoft and Google. Microsoft shares fell 2.2% after reports that Anthropic is preparing AI-powered workplace tools, including a spreadsheet application that would compete with Excel and Google Sheets, as well as video-call and data-dashboard products.
Anthropic is also positioning Claude as an alternative gateway through which businesses can access third-party software. Although the products are still relatively basic, the move shows how AI companies could increasingly challenge traditional software business models and the pricing power of incumbent providers.
SoftBank loss highlights AI infrastructure risk
SoftBank’s large quarterly loss brought concerns about returns on AI infrastructure spending into focus. The Japanese technology investor posted a net loss of ¥1.12tn, which included a $3.7bn writedown on US data-centre projects, while its financing costs more than doubled. Its $64.6bn exposure to OpenAI also makes it more sensitive to shifts in AI valuations and funding requirements. The results show the financial risks that come with aggressive AI infrastructure investment, particularly where projects rely on continued access to capital and sustained growth in demand.
US-China tensions and the optical supply chain
Technology tensions between the US and China could add further uncertainty to the AI infrastructure supply chain. Microsoft and other technology firms are urging the Trump administration to reconsider proposed restrictions on imports of Chinese optical transceivers, arguing that US suppliers do not yet have enough capacity to replace Chinese production. Restrictions could slow data-centre construction and leave expensive AI chips underused. The issue underlines how critical optical connectivity has become to AI infrastructure, and how geopolitical considerations could shape the industry’s expansion.
TSMC investments and Nvidia scrutiny
TSMC’s strong results also reflect the growing strategic weight of chipmakers within the wider AI ecosystem. The company has approved investments of up to $500m each in Anthropic and OpenAI, broadening its exposure beyond chip manufacturing.
Nvidia, meanwhile, faces added uncertainty following political scrutiny of its chief executive and reported national security concerns. The allegations remain under investigation and there is no established evidence of wrongdoing. Even so, the episode illustrates the governance and geopolitical risks that can surround strategically important technology companies.
Earnings and broker views beyond technology
Outside the technology sector, corporate results were mixed, while brokers remain broadly constructive on equities but are becoming more selective.
Corporate earnings
Petrobras lifted third-quarter net profit by 21.5% to 39.75bn reais, although adjusted EBITDA fell short of market expectations as the benefit from higher oil prices started to moderate. Vodafone raised its FY2027 guidance on the back of stronger service revenue and improving cost synergies. In Europe, Renault received a broker upgrade on expectations of better electric vehicle profitability, while Mercedes-Benz was downgraded amid rising costs and intensifying Chinese competition.
Broker views on equities
UBS kept its positive outlook on US equities, maintaining its year-end 2027 S&P 500 target of 8,900 and forecasting earnings per share of $430 in 2027. The bank prefers semiconductors to technology hardware and favours the Nasdaq 100 over the Russell 2000. Elsewhere, Qualcomm was downgraded following continued pressure on gross margins.
What to watch today
The US mortgage market is the main economic focus, with MBA mortgage applications and refinancing data due, offering an update on housing activity and borrowing demand. On the corporate side, Siemens Energy, E.ON and RWE are scheduled to report, together with ABN AMRO, Poste Italiane, Franco-Nevada, Recruit Holdings and Alcon.
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